Notes: The greenback remains at risk heading into the FOMC tomorrow with the index sitting at a key support range for the last four sessions. This region is defined by trendline support dating back to the mid-November swing low, the 61.8% extension off that rally, the 200DMA and the 23.6% retracement of the advance off the October low. Note that daily RSI divergence and multiple failed attempts at a 60-breach further highlight the risk for a more substantial pullback. That said, should the Fed be dollar supportive, we will look to target topside objectives against 10,648 with our broader bias weighted to the topside while above 10,554.

Breach targets 1.38, 1.3830 & TL resistance dating back to the 2008 high

Topside momentum trigger pending

Key Support 1.3522/34 backed by 1.35

Support break targets support objectives at 1.3450, 1.3419/22 & 1.3352/60

Notes: Last week we highlighted our topside scalp bias against key support at 1.3522/34 and while the pair did probe above the 1.37-handle, failure to close above this mark puts our broader bearish bias back in focus heading into the FOMC. The 1.3745 level is defined by the 61.8% retracement taken form the decline off the December 27th high and is the close of that day. As such, we will respect a topside breach above this level with such a scenario invalidating our bearish outlook and eyeing the January highs at 1.3775 and the key resistance range between 1.38-1.3830. A break sub-1.3622 (weekly range low & 50% retracement of the advance off monthly lows) puts key support back into view at 1.3522/34.

USDCAD Daily Chart

Technical Outlook

USDCAD at key Fibonacci resistance 1.1157- bearish invalidation

Subsequent topside objectives 1.1234, 1.1300 & 1.1478

Interim support 1.1035- broader bias constructive above 1.0884-1.0923

Notes: The pair has now come into a major resistance target at the 100% Fibonacci extension taken from the advance off the 2012 low at 1.1157. We have continued to eye this key mark in the DailyFX on Demand trading room while noting that a failure to close above this level does leave the pair vulnerable. A break below 1.1035 invalidates our near-term bias with the broader outlook weighted to the topside above 1.0884-1.0923. Note that although momentum metrics have been in overbought territory, it’s important to keep in mind that the pair recently broke multi-year highs after compromising trendline resistance dating back to the 2003 peak. As such, these metrics can remain in overbought for an indefinite time period and we will respect the topside so long as the oscillator holds above the 70-threshold.

Notes: A topside monthly opening range break on January 10th shifted our focus higher into key resistance at the $1268/70 threshold. This has been a level of significance for some time now and remains central focus heading into the rate decision. Our immediate focus is to the downside against this level with a break below $1230/37 putting our broader bearish bias back in play. That said, we will respect a breach/close above $1270 with such a scenario suggesting a more significant low was put in place in late December.

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